Risks of Operating a Nightclub

Posted on: April 17, 2013

Operating a nightclub can be a rewarding business venture, but also one that poses a variety of risks. You need to contend with the safety of your customers and employees while avoiding liabilities, crimes, and potentially dangerous situations, like nightclub fires. As the club owner, you are responsible for the health and safety of everyone inside and maintaining proper practices to keep it successful. Consider these operating risks to be sure you have proper protection.

Safety Precautions

As the nightclub owner, the onus is on you to keep the club safe for all employees and patrons. This includes having updated smoke detectors and fire alarms, regularly maintained gas and electrical systems, adequate exits, and first aid on-hand.

Another important consideration is to know and adhere to the proper person accommodation limit of your facility to avoid your nightclub being packed too full. Your local fire department will provide you with a max amount of people allowed in your club at all times. If you go over this amount, it is a fire code violation and could pose a dangerous situation. For example, a nightclub fire in Brazil at the end of January resulted in the death of 233 people. Smoke inhalation and the inability of club goers to exit caused the horrific deaths. The nightclub had 2,000 people; more than double what they were allowed. To keep this from horrible event from happening at your nightclub, keep the safety precautions in mind.

Legal and Liability Issues

Another issue is not following your local guidelines and rules for operating a nightclub. Obtain the proper permits and business licenses, including a license to operate a nightclub and liquor license. Be sure to check ID before selling liquor to anyone. Failing to do so could result in fines and the loss of your liquor license. It’s also critical to obtain liquor liability insurance. Liability issues include the injury of any customer from a number of circumstances, including from a customer becoming intoxicated, falling and injuring themselves, slipping on a spilled drink, or getting ill from the drink or food they were served.

Illegal Activity

Another risk is that of illegal activity occurring in your nightclub. You should have trained security in the nightclub to monitor illegal activity like gambling, fighting, illegal drug activity, underage drinking or smoking, and other misconduct. This can avoid potential litigtion later on, such as lawsuit from a parent of an underage teen who was drinking at your establishment and got into an accident as a result.

Location

The reason location is a risk is because your community may not be open to the idea of having a nightclub. Some nightclubs are synonymous with increasing the amount of physical altercations, drunk driving accidents, excessive noise, and dangerous and illegal activity occurring in their neighborhood. Check with your community before opening your nightclub to make sure you’re not up against any of these issues.

Financial Risks

Operating a nightclub also puts you at risk for financial considerations. For one, you run the risk of losing your start-up capital if your club doesn’t do well from the beginning. Another financial risk is that of theft of your alcohol or money from employees or customers. Business insurance is the best way to cover this particular risk. Consider all your cost considerations when operating the nightclub including operating licenses and fees, paying employees, security expenses, insurance costs, advertising fees, stocking the nightclub, and other costs related to daily operations.

Now that you are aware of your operating risks, you can protect your nightclub. To mitigate these risks, you need business insurance. You should have a business insurance policy to protect each risk, including as business property, general liability, crime insurance, employee dishonesty coverage, professional liability, and others.